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Report by Brattle Economists Evaluates the Cost and Benefits of a NHTSA Mandate

Brattle economists Coleman Bazelon and Lucrezio Figurelli authored a report released today that analyzes the economic cost and benefits of the National Highway Traffic Safety Administration’s (NHTSA) proposal to mandate a vehicle-to-vehicle (V2V) communication standard in the 5.9 GHz band known as dedicated short range communication (DSRC).

In the technology report accompanying the proposal (the “V2V Technology Report”), NHTSA presented preliminary estimates of the direct monetary costs of a potential V2V DSRC mandate and of the benefits in terms of reduced crash rates, fatality rates, and crash severity under three different implementation scenarios. According to Brattle economists, this report did not constitute a suitable analytical framework to evaluate the full set of benefits and costs of the mandate.

The Brattle report, prepared for the National Cable & Telecommunications Association, reviews and adjusts the NHTSA’s analysis to analyze the welfare effect of a V2V DSRC mandate under alternative policy configuration, relative to an alternative scenario in which V2V is not mandated. Building on the NHTSA’s analysis, the authors develop a preliminary cost benefit analysis that accounts for the trends in safety technologies, allows for some possibility of failure and miscommunication among DSRC devices, and monetizes the safety benefits in accordance with the Office of Management and Budget guidelines. The authors also highlight the opportunity costs associated with spectrum use by comparing a mandate assigning the full 75 MHz of spectrum for exclusive DSRC use to an alternative scenario that conservatively provides for exclusive DSRC use of the upper 30 MHz of the 5.9 GHz band.

The authors find that the NHTSA report overstates the net benefit of a V2V DSRC mandate by hundreds of billions of dollars. They note that the net benefits of a V2V DSRC mandate without spectrum sharing range between a net loss of $140 billion and a benefit of $442 billion, depending on the parameter assumptions. In addition, allowing for shared use of the lower portion of the 5.9 GHz band would always produce large, positive benefits. Lastly, the authors conclude that the shared use of the lower portion of the 5.9 GHz band would both achieve the full safety benefits of V2V communications and maximize the value of the spectrum regardless of the parameter assumptions used.

The full report, “The Economic Costs and Benefits of a Federal Mandate the All Light Vehicles Employ 5.9 GHz DSRC Technology,” is available for download below.